Energy Towers developer proposes master agreement

By Joseph Basco | jbasco@mrt.com

Published 11:39 pm, Wednesday, July 2, 2014

In a post-two tower redesign, Energy Related Properties and the city of Midland are back in negotiations, as the co-developer of Energy Towers of City Center delivered a draft of a master agreement to the city on Tuesday.

The 24-page master development agreement drafted by ERP has some proposals laid out in previous agreements between the two parties. Tax reimbursement incentives derived from sales tax and hotel and motel tax and a $10 million incentive from the Midland Development Corp. made it into the draft.

The differences, though, come in the wake of the June 24 City Council meeting in which ERP and other co-developers presented the project’s new scope. The meeting was called after council members expressed frustration with not being updated on the two-tower redesign before it was publicly announced and advertised by developers in May.

“We heard loud and clear from the council that we’re starting from ground zero on this agreement,” City Manager Courtney Sharp said. “Since that project has changed so much from the original scope, council wants a clean slate and start all over with the incentives. The $75 million, including waiving the landfill fees and whatnot, that’s off the table.”

The draft is in its early stages as several notable components, such as plans for Midland Center and property tax reimbursement, are incomplete. There isn’t any indication if developers intend to purchase just the former Midland County Courthouse block and vacated Loraine Street right-of-way or the Midland Center and Midland Chamber of Commerce block as well.

Additionally, dates, percentages and dollar amounts are all left blank. District 2 Councilman John Love said the city expects to have more definitive numbers from developers by the end of July, which would help keep the negotiations going.

The city has yet to include its own edits or additions to the draft.

Mayor Jerry Morales, Sharp and Love, all members of the steering committee involved in the negotiations with ERP, all said the draft has some things they agree with and some things they disagree with.

“What ERP put in the agreement is what they would like to happen,” Love said. “Whether or not it actually happens is a completely different story.”

The developers proposed modifying the sales tax and hotel and motel tax reimbursements by increasing the maximum reimbursement period to 20 years if fewer than four taxing entities contribute to the incentives.

Before the two-tower design, Midland County and Midland College had interest in contributing to the tax reimbursement incentives. Sharp said he has not had indication if the other entities are on board with the two-tower design.

One of the new additions to the agreements made after the council meeting entails having a public meeting or public survey to gauge the public’s interest in park improvements.

“If the public is willing, and (developers) are willing to spend, I think we’re going to have a good discussion,” Morales said.

The proposed redesign of Centennial Plaza includes the option for an amphitheater and a downward slope that leads to the entrance for the west tower’s retail space and movie theater.

The draft still calls for allocating parking spaces to the public, though the number of spaces is left blank. The spaces available for public use are subject to reasonable fees, rules and regulations established by the owner of the parking structure, according to the draft.

Developers previously revealed that they plan to make the parking garages, one above ground and one below ground, privately owned. The developers are targeting 1,800 parking spaces, 38 percent less space than originally planned in the original Energy Tower design.

The proposed draft also states the city will use its “good faith efforts” to have a dedicated review team that will examine all the plans required to be submitted to the city. Another proposal is having the city push for an act in the 2015 legislative session that waives the city’s sovereign or governmental immunity from lawsuit regarding city funding and tax reimbursement obligations.

The master development agreement is expected to be negotiated for an undetermined amount of time. Once finalized by City Council and ERP, the master development agreement would replace the term sheet, which has been determined by both the city and ERP to be null and void, Sharp said.

City Council still plans to vote on Tuesday on continuing or terminating the purchase and sale agreement and its amendment regarding the sale of the courthouse property.

After that, ERP will still have to present a developer’s agreement by the Sept. 30 due diligence deadline stated in the purchase and sale agreement. ERP has the option to extend the due diligence period for three months at $100,000 per month. The master development agreement may either become an exhibit to the developer’s agreement or become the developer’s agreement itself, Sharp said.